The container operations of Johor Port Bhd are in the final stages of being consolidated with that of its sister port Pelabuhan Tanjung Pelepas Sdn Bhd (PTP) that will further boost connectivity in the ports, sources say.

Industry players say the consolidation exercise, which is likely to take effect soon, has its merits although it is unlikely to have any positive financial impact on parent company MMC Corp Bhd in the near future. With the consolidation, PTP will add nearly a million 20-foot equivalent units (TEUs) in throughput.

According to MMC’s annual report, Johor Port handled 934,767 TEUs last year while PTP registered a throughput of about 5.6 million TEUs. Although the consolidation will boost PTP’s throughput by some 17%, the impact could be greater in the long term.

Both Johor Port and PTP are controlled by MMC, with the former a wholly-owned unit and the latter a 70% subsidiary. The remaining 30% stake in PTP is held by AP Moller Maersk, which owns behemoth shipping company Maersk Lines. MMC is in turn 51.7%-owned by businessman Tan Sri Syed Mokhtar Al-Bukhary via his private companies Seaport Terminal (Johor) Sdn Bhd and Indra Cita Sdn Bhd.

After the consolidation, Johor Port will handle the bulk operations such as grain, iron ore and coal. Plans for Johor Port to concentrate on bulk operations were made in March 2004 when Johor Port received accreditation from the London Metal Exchange (LME) for warehousing activities and facilities. The LME move would enhance its competitiveness in the trading of non-ferrous metals on the international market.

The consolidation exercise will have a positive impact on connectivity, which is a key feature of a successful port operation. Connectivity enables the transport of containers from a transshipment hub, such as PTP, to other smaller, regional ports. Large vessels with carrying capacities of 6,000 TEUs to 10,000 TEUs and plying international waters drop off containers at transshipment ports while smaller ships load up the same containers and transport them to their final destinations.

Thus, it is impossible for a port or transshipment hub, such as PTP, to achieve its full potential without proper connectivity.

In the case of Port of Singapore Authority, its website boasts of four container terminals in Singapore and claims to have the best connectivity, given its 200-shipping line network.

At present, PTP’s main clients are the Danish shipping giant Maersk Line and Taiwanese Evergreen Marine Corp, the second-largest container shipping company in the world. It has also recently secured Marseilles-based main line operator CMA CGM SA (Compagnie Maritime D’Affrement-Compagnie Generale Maritime), while national carrier MISC Bhd is another client.

Besides the three main line operators and MISC, PTP also caters for Safmarine Container Lines NV, which is the feeder unit of Maersk, and Lloyd Triestino di Navigazione SpA, which is linked to Evergreen, as well as several shipping lines that call at PTP such as India-based Bengal Tiger Lines.

Among the more prominent shipping lines calling at Johor Port are Thailand-based Regional Container Lines, Hong Kong billionaire Tung Chee Hwa’s Orient Overseas Container Lines, and Japan-based Kawasaki Kisen Kaisha Lines (commonly known as K-Line).

“This consolidation exercise should have been done a long time ago. It does not make sense to have two competing (container) ports so close to each other. And that too with the owner trying to boost one — PTP,” says an observer.

“Connectivity and the number of (shipping) lines calling at the port are inter-related. This (consolidation) is a good move,” he adds.

The double-tracking railway project, undertaken by MMC and its partner Gamuda Bhd, will also likely boost PTP’s throughput. The MMC-Gamuda consortium is constructing the northern portion of the track from Padang Besar to Ipoh, while the southern portion, linking Gemas to Seremban, is being built by several other parties.

According to news reports, there is a proposal to construct a 197km double-tracking railway line from Gemas to Johor at a cost of RM7.5 billion under the 10th Malaysia Plan. This railway line will enable containers to be transported to PTP from as far as southern Thailand.

With PTP undertaking an enlarged container business after the consolidation, there is potential for the port to expand its capacity to handle the growing container traffic.

At present, PTP has 10 berths with each measuring 360m in length or a combined 3.6km quayline, with two more berths under construction. The port’s current capacity is eight million TEUs, but this will be increased to about 10 million TEUs when the two berths are completed.

However, PTP’s master plan is to have 75 berths stretching from its current base at the mouth of Pulai River to the Malaysia-Singapore Second Link. This could only mean that PTP is among the few operating container ports that have the long-term potential of handling the growing container business.

Sources familiar with PTP say the port will lease out berths to large companies or port operators that will eventually reflect PTP’s potential.

Since 1956 when the first container ship, the Ideal X, carried 58 containers from Newark to Houston, containerisation has seen strong growth, with 90% of non-bulk cargo being transported via containers now.

Although the economic downturn has adversely affected container ports and the container shipping industry, the business is cyclical and is expected to pick up in a year or two. According to Drewry Shipping Consultants, there is likely to be a modest growth in the container business in 2011.

The consolidated container operations under PTP, coupled with its improved connectivity, could be a boon to MMC when business in the port sector eventually picks up.

This article appeared in The Edge Malaysia, Issue 774, Sep 28-Oct 4, 2009.